Financial integration and currency risk premium in CEECs: Evidence from the ICAPM

Salem Boubakri and Cyriac Guillaumin

Emerging Markets Review, 2011, vol. 12, issue 4, 460-484

Abstract: This paper aims to study the Central and Eastern European Countries' (CEECs) dynamics of financial integration in the euro area with the prospect of their integration into the European Monetary Union. Our empirical analysis is based, successively, on a MGARCH model with time-varying correlations, a state-space model and a Markov-switching model. The results show that financial integration (i) is not perfect but is increasing and (ii) is linked to currency stability. The growing financial integration in 2007–2009 seems to be rather the result of the shock propagated by the global crisis.

Keywords: CEECs; Euro area; Currency risk premium; Financial integration; International Capital Asset Pricing Model (ICAPM) (search for similar items in EconPapers)
JEL-codes: C32 F31 F36 G11 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:12:y:2011:i:4:p:460-484

DOI: 10.1016/j.ememar.2011.08.001

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